Why the World Isn't Flat

The Truth About Globalization and the Secret History of Capitalism

On Feb. 1, Whitehead Senior Fellow Michael Lind hosted award-winning Cambridge economist Ha-Joon Chang, who delivered a talk based on his new book, Bad Samaritans: The Myth of Free Trade and the Secret History of Capitalism. A brief summary follows, while an MP3 audio recording of the 71-minute event can be downloaded below and the video can be viewed at right.

Chang’s central theme was that developing countries should look to the history of successful nations, rather than economic theory, to guide their economic policy-making. He began by drawing upon historical examples to challenge the notion that developing countries should adhere to orthodox free-market policies.

Of today’s advanced industrial economies, according to him, only three -- the Netherlands, Hong Kong, and Switzerland -- refrained from erecting trade barriers and subsidizing infant industries during the early stages of their development. All of the others benefited from significant government intervention.

He further noted that the United States, the most successful economy the world has ever seen, did not develop according to free-market principles. At the beginning of the nineteenth century, the U.S. comparative advantage lay in agriculture. Thomas Jefferson and many others argued that the United States should remain a nation of farmers and import its industrial goods from Britain. Alexander Hamilton, however, argued that the long-term economic benefits of industrialization would dwarf the short-term inefficiencies associated with market intervention. History has proven him correct.

Furthermore, Chang pointed out that austere free-market polices simply have not worked for developing countries. Economic growth rates in developing countries fell by more than half when those countries moved from the ‘import-substitution’ policies of the 1950s and 1960s to the laissez-faire policies of the 1980s and 1990s.

He then extended his argument to patent laws. Those countries that industrialized during the nineteenth century borrowed one another’s ideas liberally. The result was a tremendous acceleration of innovation.

In contrast, he argued that today’s international patent laws are designed not to promote innovation, but rather to protect powerful corporate interests in wealthy countries. According to him, “the balance between the rights of patentees and the rest of society has tilted too much to one side.” With few exceptions, the presence of competition and the motivation to attain profit are enough to promote innovation. -- Event summary by Ben Katcher

Ha-Joon Chang has been described by one economist as "the most exciting thinker our profession has turned out in the past fifteen years." He teaches at Cambridge University, where he received his Master's degree and doctorate. A consultant for the Wold Bank, the Asian Development Bank, the UN and other international organizations, he was awarded the Leontief Prize for Advancing the Frontiers of Economic Thought in 2005. His book Kicking Away the Ladder: Development Strategy in Historical Perspective (2002), which received the Myrdal Prize, was acclaimed by the eminent MIT economist Charles Kindleberger as "a provocative critique of mainstream economists' sermons directed to developing countries."

This event was co-sponsored by the New America Foundation and the Center for Economic and Policy Research (CEPR).